* European stocks rise, Germany's DAX hits 1-mth high
* Nikkei rises as dollar notches 1-month highs vs yen
* Crude oil futures pressured by strong dollar
By Anirban Nag
LONDON, May 30 (Reuters) - European shares hit one-month
highs on Monday, while the dollar index rose to a two-month peak
after Federal Reserve Chair Janet Yellen suggested that an
interest rate hike in the United States may be around the
corner.
The Fed should raise rates "in the coming months" if growth
picks up and the labour market continues to improve, Yellen said
on Friday. St. Louis Fed President James Bullard chimed in,
saying on Monday, global markets appear to be "well-prepared"
for a summer rate hike, although he did not specify a date for
the policy move.
The probability of a rate increase at the Federal Open
Market Committee's June 14-15 meeting rose to around 34 percent
from 26 percent on Thursday, according to CME's Fedwatch
programme. Bets on an increase at the July 26-27 policy meeting
edged up to 60 percent, more than double the level of a month
ago.
Against a basket of currencies, the dollar was up 0.4
percent at 95.879 .DXY , while the euro struggled near 2-1/2
month lows of $1.1097 hit in the Asian session EUR= .
The euro zone's blue-chip Euro STOXX 50 index .STOXX50E
was 0.1 percent higher, while Germany's DAX .GDAXI was up 0.3
percent, hitting a one-month high. Trading volumes are expected
to be thin as the London and New York markets are closed for a
public holiday.
While higher U.S. interest rates would sap global liquidity,
Wall Street and European investors took Yellen's comments in
their stride, as they suggested the world's largest economy was
strong enough to weather another rate hike, following from the
December hike.
"The return to U.S. rate hike expectations have reopened the
possibility of short-term outperformance for European stocks,"
said Didier Duret, global chief investment officer at ABN-AMRO
Private Banking, adding investors were keeping an eye on the
dollar for it to break recent ranges.
The rise in European markets came after Japan's Nikkei stock
index .N225 ended up 1.4 percent, as the yen JPY= weakened
to a one-month low and expectations rose that the government
would delay a sales tax hike scheduled for April next year.
Japanese Prime Minister Shinzo Abe said he would delay the
increase by 2-1/2 years, Masahiko Komura, vice president of the
ruling Liberal Democratic Party, told reporters on Monday,
echoing what a government source told Reuters on Sunday.
One uncertainty, however, is how markets would react if a
postponement of Japan's sales tax hike were to lead to a
downgrade of the country's sovereign rating.
"What would be scary is if there were to be a downgrade. I
think equities would fall if that happens. That remains a risk,"
said Satoshi Okagawa, senior global markets analyst for Sumitomo
Mitsui Banking Corporation in Singapore.
EYES ON US DATA
This week investors will keep an eye on the all-important
U.S. non-farm payrolls and the Institute for Supply Management
surveys. The May jobs report is due on Friday and a solid
reading could heighten expectations for a June move.
Economists expect U.S. employers to have added 170,000 jobs
this month, slightly more than they did in April. Hourly wages
are expected to show a 0.2 percent increase from the previous
month. ECONUS
Crude oil futures remained shy of the $50 per barrel level
after marking weekly gains, feeling some pressure from the
stronger U.S. dollar that made it more expensive for holders of
other currencies.
Brent crude LCOc1 slipped to $49.10 a barrel, after
gaining 1 percent last week. U.S. crude CLc1 was down 0.3
percent at $49.18 after rising about 3 percent for the week.
The dollar's strength took a toll on spot gold XAU= , which
dropped 0.9 percent to $1,201 an ounce. It plumbed a low of
$1,199.60 earlier in the day, its lowest since late February.